The rand was almost at a three-month high against the dollar in noon trade on Wednesday as investors' concerns about the US debt impasse hit the greenback rather than risky assets.
|||The rand was almost at a three-month high against the dollar in noon trade on Wednesday as investors' concerns about the US debt impasse hit the greenback rather than risky assets.
“The last time we saw the rand at these levels against the dollar was around the beginning of May,” a local market analyst said.
“The rand is performing well and it could be that our currency has underperformed over a long period and is now catching up to other emerging market currencies.”
“But it's still a case of dollar weakness playing out, yet structurally the rand is quite strong - and in the longer term, we think - resilient.”
At 11:39 local time, the rand was bid at 6.6308 to the dollar from its previous close of 6.6754. It was bid at 9.6144 to the euro from 9.6830 before, and at 10.8665 against sterling from 10.9466 previously.
The euro was at US$1.4493 from US$1.4506.
RMB said in a morning note that the US budget/debt impasse was hurting the dollar more than it was hurting risky assets.
“While the downside trend could well extend into next week, we should be aware that when - or is that if? - a deal in the US is finally struck, we are going to experience a snapback.”
RMB added that the news on the budget/debt talks was not encouraging.
“A delay to a key House bill delays any chance of a deal to the end of this week, at best. The only compromise that seems to be receiving any traction is to water down the adjustments - which increases the probability of a US sovereign ratings downgrade.”
Given the absence of any progress in the talks, market attention had turned to assessing what would happen if no deal on the debt ceiling was reached, and the US was downgraded.
“A true US default would be catastrophic - 'Lehman's times ten', according to some. The core view is still for a last-minute deal and, even if a deal is delayed, that the US Treasury can keep the lights on for a few weeks after its August 2 deadline.
“The downgrade view, however, is becoming the consensus. Such an event would very likely be a rand positive in that it would - as we are seeing play out currently - hurt the US dollar more than risky assets,” RMB added.
Meanwhile, Dow Jones Newswires reported that, in foreign exchange markets during European trading hours, the euro slipped following comments made by German Finance Minister Wolfgang Schaeuble, who said the government was against a “carte blanche” for the euro-zone's rescue fund to buy bonds on the secondary market, undermining confidence in Europe's struggling countries.
He added that it would be wrong to assume the one-off summit, held last week by euro-zone leaders to discuss a fresh financial bailout plan for Greece, could solve the euro zone's debt problems.
US debt negotiations were also still hurting the dollar as the August 2 deadline for an agreement on the debt ceiling loomed.
European sovereign debt concerns and the continuing stalemate among US policymakers were pushing the flight to traditional safe havens. - I-Net Bridge
Source: http://www.iol.co.za/rand-near-3-month-high-vs-dollar-1.1106860
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